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  The first of these leaders was Walter Wriston, chairman and CEO of Citicorp/Citibank (later Citigroup) in the US, which was at one point the largest bank in the world in terms of financial assets. Wriston was very much the doyen of banking and was held in the highest regard by Government, customers, employees, shareholders and, above all, his competitors. He was very much a cerebral visionary. In his fifteen-year term at the helm of Citicorp/Citibank, the organisation grew to be the largest international bank in the world, with a presence in over one hundred countries by the time of his retirement in 1984. His vision of creating a massive international financial services organisation with an equally strong US domestic banking franchise was achieved during his term of office. It was not without its challenges and failures but, in the end, as the reins of the organisation were handed over to John Reed, Citicorp/Citibank could boast of having an established domestic and international presence in both consumer and wholesale corporate banking.

  Globalisation was accelerated under the new leadership. The desire of John Reed to grow a massive diversified financial services company – including an investment banking arm and insurance business through the acquisition of Solomon Brothers and a merger with Travelers Insurance Company – came about after the 1987 amendment to the Glass–Steagall Act of 1933 (see Chapter 1). The conflicts that occurred due to the difficulty of integrating these various activities resulted in the retirement of John Reed, who was joint head of the institution with Sandy Weill, in 2000. Whatever the differences in style of leadership of the two senior directors, as perceived by the Citicorp board, it was Sandy Weill who survived. The extraordinary growth of this institution over the next seven or eight years resulted in the US Government having to bail out the bank at the onset of the US financial crisis in September 2008. Weill was succeeded by Vikram Pandit in December 2007.

  I joined Security Pacific in London in 1985 to set up an international merchant bank. I saw the organisation grow from 2 executives with a small presence in the UK to 3,700 staff in both the debt and equity capital markets, with a presence in 11 financial centres around the world, including New York, London, Frankfurt, Tokyo, Geneva and Sydney. CEO Dick Flamson had a vision at that time which was based on both organic growth and acquisitions. Major brokerage operations in the UK (Hoare Govett), Canada (Burns Fry), New York, Sydney, Tokyo and Frankfurt were identified to complete a global presence. The objective was to create a debt and equity securities capability in each of the major financial centres of the world, thus creating global reach. The challenges were basically twofold: management of cultural differences between major US commercial banks and local foreign brokers in each of the countries, together with the need for substantial capital allocations and strong internal governance for these diverse entities. As in the case of Walter Wriston and Citigroup, when Dick Flamson was ready to hand over the reins of the organisation he did so to an individual in the Security Pacific mould who had come out of the operations and processing side of the bank. His name was Robert (Bob) Smith. His background was domestic US banking with a strong emphasis on operations. The complexities of the capital markets internationally and domestically would lead to the undoing of the global vision. Security Pacific was taken over by Bank of America in 1992 as a result of the poor execution of an acquisition of a major residential property portfolio in Arizona. The suitability of Bob Smith for the role of Flamson’s successor was in question from the outset, but the capital and balance sheet challenges that ensued were far too much for the new team to manage. Again, here was a succession plan that appeared set for failure from the beginning.

  In 1994 I had the good fortune to join National Australia Bank (NAB) in London with the mandate to develop a profitable wholesale business in the UK and Europe, similar to what I had achieved with Security Pacific but not on the same scale. It was a privilege for me to be appointed to the executive committee of NAB in Melbourne in 1998. Don Argus was the CEO of NAB at the time.

  Under Argus’s leadership, NAB expanded internationally over time, with the key focus on retail banking. Over several years of expansion, the group had an established presence outside of Australia in England, Ireland, Scotland, Northern Ireland, the US and New Zealand. Argus’s presence was felt throughout the organisation. Here, again, was a fine leader who would prove to be difficult, if not impossible, to replace. By 1999, Argus had decided to move on and was faced with a succession decision. While the proof of Argus’s greatness is reflected in his subsequent appointment as chairman of BHP, which became BHP Billiton – the largest mining and resource company in the world – the fate of his beloved NAB was placed in the hands of Frank Cicutto, a NAB employee all his life, who was best described as a credit specialist within the Australian empire. NAB had enjoyed the status of premier bank under Argus for many years but the challenges that beset his successor were enough to see this great institution relegated in the financial league tables. There is an opportunity for a turnaround by the new management team today as the share price currently flounders at levels last experienced some nine years ago.

  Another interesting aspect of my time on the executive committee in NAB in Melbourne was the composition of the committee itself. Fred Goodwin, a relatively unknown banker in 1997, was a senior executive on this committee, having spent the previous couple of years as CEO of Clydesdale Bank, a subsidiary of NAB. Fred departed NAB in 1999 when he became deputy chief executive of Royal Bank of Scotland, where he was credited as being the driving force behind the successful takeover of National Westminster Bank in 2002. Fred subsequently became chief executive of Royal Bank of Scotland and was knighted a couple of years later. This bank grew organically and, at Fred’s insistence, through acquisition of parts of ABN/AMRO. This acquisition was opposed by many investors and analysts and was the straw that broke the camel’s back. Sir Fred Goodwin, after the crash in late 2008, became the most vilified banker in the UK. Fred believed, in business career terms, that he was in a class of his own. There are few who might argue with that self-assessment today. Anyone who worked with him will know he was an intelligent executive with a strong technical skill base and a single-minded attitude to match. Who in the succession planning process in the Royal Bank of Scotland could have recognised the weaknesses that led to the demise of this great institution under Fred’s leadership? Were there any tell-tale signs that were overlooked in the process?

  I was fortunate to have Laurence Crowley as Governor (chairman) of Bank of Ireland when I was appointed in 2002 as CEO of the bank. Laurence Crowley had earned a reputation for integrity, good judgment and equally good leadership in Ireland. As an outsider, it was hoped that I could bring change to an organisation that had been founded in 1783 and had developed a strong culture of integrity, respectfulness and industriousness, draped in an Irish flag.

  A genuine icon, Bank of Ireland was respected locally and well regarded by regulators and competitors. Innovation was not high on the agenda and a culture of entitlement prevailed. Rank had its privileges. The obligation of earning rather than being entitled was lost in the hundreds of years of institutionalisation within the bank. A fear of change prevailed. What got the bank to where it was in iconic, if not financial, terms was believed to be sufficient. Openly challenging the status quo was not always acceptable as it appeared to reflect disrespect for the past, which had made the institution what it was. I introduced cost management programmes early in my tenure, which fundamentally put the freedom of choice in terms of cars, travel and incidental expenses back into the hands of the employees. This was not met with enthusiasm as the culture of entitlement was ever comforting.

  Again, in the arena of succession planning, with my sudden departure from Bank of Ireland in 2004 after some two years and eight months at the helm, I am left wondering to this day as to what is the level of preparedness needed from a board’s perspective to ensure an uncomplicated transition at chief executive level. In the interest of protecting this great institution that I had come to admire, I was faced with a
n incredible dilemma when information pertaining to access to an adult website by myself was released to the Sunday Business Post on the last weekend in May 2004. I made the only decision I could in order to protect the reputation of the institution. The release of this information occurred some 8 weeks after 500 technology jobs in the bank were outsourced to Hewlett Packard. To this day I do not know where the leak sprung from. In my judgment, no personal reputation was worth the effects the potential salacious coverage of this story might have had on the corporate reputation of Ireland’s financial icon. That being the case, considering the time pressures, the Court (board) had few options. The obvious internal candidate for succession was Brian Goggin; an external search was unlikely to identify a better candidate. He was the most experienced internal candidate and was viewed as a safe pair of hands in this time of turmoil, since I had departed the bank instantly. In the interests of corporate performance, no CEO deserves to pay the price, in terms of health, that Brian Goggin has.

  Who could have expected that the board, which had accepted my resignation on the grounds of protecting the reputation of the bank, would have overseen, under a new chairman and CEO, the irreparable damage done to Bank of Ireland’s reputation and, more so, to the reputation of the country over recent years? The fingerprints of all those who are responsible for the failure of the bank to withstand the current crisis are easily identified. Many are still on the board. I consider open dissent to be my responsibility and obligation.

  The identification and appointment of key executives and in particular CEOs has to be seen as the most important responsibility of the chairperson and the nominations committee in any public financial institution. What these examples above show is that mistakes can be made at board level in the appointment of leaders. The pattern of a respected and able leader being replaced by someone who doesn’t have the capacity to take a corporation through whatever challenges arise may have to do with the successor being appointed at a time when the corporation is confident and in a strong position. In this situation, having someone at the helm with different qualities to the previous leader is perhaps not seen as a problem. The process of succession needs to be examined in major financial institutions to see where improvements can be made to safeguard the long-term viability of the institutions.

  After a lifetime of banking in the Irish and international markets, I can reflect on my experiences and offer observations and suggestions for the survival of financial institutions in Ireland in the long term. As I recount my experiences with leaders in the financial community and observe the failures of institutions, I must conclude that some institutions can become too large to manage. Perhaps it would be clearer to say that, beyond a certain size, the complexities of managing major financial institutions accentuate the multiple risks undertaken. Few executives have the experience or skill base to manage complex financial institutions, so one may conclude that constraining banks from becoming systemic risks is the best safeguard to protect the financial system in a country in the long term.

  During my time at Citicorp/Citibank, Security Pacific, National Australia Bank and Bank of Ireland, a lot of time, effort and money were invested in the pursuit of the creation of a code of behaviour and the establishment of corporate values. These pursuits are often deemed to be futile by those who believe the introspective nature of these activities to be boring and tedious. But if board members and the executive management of an organisation cannot stand by its enshrined values and standards, it is unlikely that the rest of the employees will. Within a bank, there must be a clear vision for the direction of the organisation, which is communicated clearly to all stakeholders; integrity in all dealings; a strong capital base; an acceptance of change; a culture of sensible corporate governance; an unending hunger to be best in class; and, to make all this possible, a strong leader who is respected by all.

  When the dust clears on the nationalisations and bankruptcies in the banking world, an examination of those leaders who failed or came through the crisis somewhat scathed would make interesting reading. Good leadership, not just in banking but at the highest political level, is the key to our recovery.

  Here are the characteristics we don’t want in our leaders, but which have unfortunately been demonstrated by some of them over recent years:

  • Say one thing and mean another.

  • Act in accordance with hidden agendas.

  • Prefer to look good rather than doing the right thing.

  • Personal needs are put ahead of the good of society.

  However, there are behaviours that have been accepted over time as good leadership practice across all professions and sectors of society. The one characteristic that can be identified in all good leaders is authenticity, which is reflected in the following:

  • Communicate honestly and wisely.

  • Their actions match their words.

  • Say clearly what they believe and stand for.

  • Respect and uphold people’s dignity.

  • Treat people fairly and equitably.

  Having standards that we agree on, such as the checklist above, makes our judgment of our leaders more balanced and consistent. Some may think that it is too idealistic to have such a code of behaviour, but surely we should have something to aspire to.

  Whether in the political, corporate or even domestic arenas, leaders are constantly under pressure for results from their followers. To maintain a position of power, leaders may often make decisions that favour the shortterm solution with scant regard for the value of long-term planning. Governments and companies need to maintain balance between the long- and short-term goals of their constituents in order to survive. Sustainable prosperity requires a long-term view, which frequently means that certain short-term decisions have to be subordinated in favour of long-term goals. Success is unlikely to be achieved by frequent abrupt changes in strategy, which are symptomatic of a lack of long-term vision. Simply put, leaders should articulate clear plans to the shareholders or the electorate and any short-term decisions taken should be viewed within a long-term time frame. A clear communication plan needs to be in place so that people understand that what is politically favourable cannot be put ahead of what is in the best long-term interests of society. As a leader, you shouldn’t underestimate your stakeholders; they will stay with you for the long term if you explain your decisions in the context of a long-term time horizon. This applies equally to corporate leaders and politicians and it might be best summarised in the following quote: ‘Good leaders achieve results; great leaders achieve sustainable results by serving multiple constituencies.’4

  Viewing with hindsight the political and banking environments that incubated the current financial crisis, one can see that a lack of moral fibre was allowed to flourish through a culture of silent dissent. This culture, which favours silence over openness, pervades the boards of our corporations, our Government and our political parties. Bad decisions are made because good people say nothing. It is a culture deeply associated with cronyism. Silent dissent is, I believe, central to the reasons for the severity of the banking crisis in Ireland and why we got caught at a disadvantage in 2008. In this book, as a protest against this culture, I wish to exercise the opposite – open dissent.

  Open Dissent counters the culture of denial at all levels of our community, from the banking sector to the political and public sectors. Identifying the extent of our economic and financial problems is the first step to remedying them, and remedies are what this book is essentially about.

  Chapter 1 goes back as far as the Great Depression to analyse the origins of the banking crisis in the US. How and why the crisis has manifested itself as it has in Ireland is the subject of Chapter 2, while Chapter 3 looks closely at the culture of silent dissent in this country, which leads to a discussion on corporate governance, how it has failed in Ireland and what the standards should be. The controversial question of who should pay for the crisis is broached against the background of a discussion on fairne
ss in society in Chapter 4. However, pointing the finger is not constructive in the long term; an understanding of what went wrong and how we can move forward is, of course, more important. Chapter 5 is concerned with the conditions that will bring about recovery, including a look at changing the bankruptcy laws and encouraging informed investment. The controversial subject of the National Asset Management Agency (NAMA) is discussed in Chapter 6, which, if the Swedish model in the 1990s is anything to go by (Chapter 7), should be an effective machine to get Ireland out of the crisis, as long as transparency is respected and common sense prevails. Chapter 8 introduces the idea for a brand new banking model, while Chapter 9 looks at Ireland’s recovery and the issue of sovereign debt in the context of the European Union (EU).

  I am often asked, ‘Did you see the crisis coming?’ I can respond that I have written about it and spoken to many people over the past three years on the subject, whether in the newspapers, on the radio or on TV. My comments reflected a real concern for the impending financial and economic crisis and, once we became aware of the damage done, the steps that should be taken for recovery. A second question that is often posed along with the first is, ‘If you were still in banking in recent years, would you have done anything differently?’ To this I can only say that I was not there at the time decisions were being made and I therefore can take neither blame nor credit.

  However, I will say that Bank of Ireland was established in 1783 and, through modest growth over 221 years, the balance sheet reached €100 billion in assets by 2004; four years later, in 2008, the bank’s balance sheet had doubled to more than €200 billion. The accelerated growth can only be attributed to the ambitious desires of the executive management and board.